The UK’s Financial Conduct Authority (FCA) has fined Starling Bank £29m for failures in financial crime controls and for opening accounts for high-risk customers.
In its 2021 review of financial crime controls at challenger banks, the FCA found significant issues with Starling’s anti-money laundering and sanctions framework. As a result, the bank accepted a condition preventing it from opening new accounts for high-risk customers until improvements were made.
However, Starling did not adhere to this requirement and opened more than 54,000 accounts for 49,000 high-risk customers from September 2021 to November 2023.
Additionally, in January 2023, Starling discovered that its automated screening system had been screening customers against only a small portion of the complete financial sanctions list since 2017. An internal review revealed significant flaws in its financial sanctions framework. Since then, Starling has reported several possible violations of financial sanctions to the appropriate authorities.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight, commented: “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime.”
Looking forward, Starling has implemented initiatives to address these breaches and improve its overall financial crime control framework. Despite this, the FCA has said that it remains vigilant in monitoring firms to ensure they maintain effective systems and controls to mitigate financial crime risks.
The UK-based challenger bank has seen rapid growth in recent years, expanding from about 43,000 customers in 2017 to 3.6 million in 2023 – a growth so fast that the FCA said its measures to tackle financial crime did not keep pace. This could imply that Starling Bank is a victim of its own success.
Most of this success is linked to the bank’s core banking system, which has been developed entirely in-house, along with much of its technology. During a panel discussion at Fintech Week London earlier this year, Starling representatives discussed their achievements and future plans.
